News / RCL sells more older box ships for scrap as earnings fall

Photo: Paul Jiang

Thai regional box carrier Regional Container Lines (RCL), seeing falling profits, has stepped up the demolition of its elderly tonnage.

This month, with container freight rates still under pressure, RCL said its net profit for Q2 23 was down 37% year on year, to THB576m ($16.33m).

And it noted that its average revenue in Q2 dropped from $394 per teu in Q1 23 to $353, driven by high competition after the market returned to the post-pandemic ‘normal’, with lower time-charter rates, especially for small vessels.

Yesterday, according to Greek broker Intermodal, RCL sold two 1997-built 1,498 teu ships, Jitra Bhum and Kama Bhum, for recycling, for $3.63m each, or $515/ldt.

In June, RCL sold the 1996-built 1,094 teu Ratana Thida for demolition, at an undisclosed price. Last year it scrapped two other vessels.

And RCL indicated that more demolitions were on the cards. It said: “The company is seeking the opportune timing and favourable pricing to further replace its aging vessels…old vessels will be depreciated further in the future.”

The company still has 10 ships that are at least 20 years old and suitable for recycling.

It is estimated that around 112,000 teu of ships have been scrapped this year so far, due to the soft market conditions forcing the hands ofshipowners – this is a more than 10-fold increase on the 10,600 teu scrapped in the whole of last year.

And RCL expects the market to remain tough, as more newbuildings, ordered during the Covid-19-fuelled boom, enter service.

The carrier said: “The container shipping industry continues to encounter various challenges, not only a slowdown in the global economy, particularly in the US and Europe, but also high interest rates, which cause a decrease in consumption demand and purchasing power, which negatively impacted the contracted volume of shipment of commodities accordingly.

“Concurrently, the number of vessels in the market has increased, from newly built vessels during the Covid-19 pandemic, which caused the significant and continuous decline in average freight rates from the latter half of 2022.”

RCL has four 7,000 teu and two 12,000 teu vessels on order, expected to be assigned to mid-haul lanes as the company looks to expand beyond its intra-Asia core business in order to stay competitive.